Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial

Railway Budget: Big Plans in Store, And Can You Open Your Pockets Please?

The Rail Budget is here. Let’s cut through the bull and give you what’s important.

Fares Haven’t Changed

Yes, it’s time to rejoice. You’re still going to be stuffed like sardines into massive metal boxes when you’re an “unreserved” customer of the Railways, but you won’t pay a rupee more than last year.

However, you are likely to get your tickets in 5 minutes. We aren’t exactly sure why it should take five minutes either, but apparently this is a big improvement.

Freight Costs are Up

To transport goods, freight costs have been increased. The rates are between 4% and 10% (mostly 10%) and they expect traffic to grow as well. Coal transportation rates, for instance, are up 6.3%. Those people who just bid for all those coal blocks suddenly have to pay more, and we hope they factored that in.

Big Investment in Upgrades

So you complained about a train never coming on time? Well, now you can watch a movie on the Wi-Fi that the railway station will soon have. Oh, and get an SMS alert when the train is scheduled to start. (However, not when it actually arrives at your station) Why aren’t they doing a Uber/Ola-like concept where all trains will be on an India-wide, available GPS network that you can track any train on with an app? If the Railways put the GPS information in the public domain, apps can be created by anyone to track each train and then, anyone can build an app to track them. But we are not the rail minister, and we are horribly digressing.

There will also be surveillance cameras in coaches and women’s compartments without intruding on privacy. That means no cameras in the restrooms or closed bays, because there’s no privacy in any other part of a train, really.

There’s much more – lifts and escalators in stations (much required), braille-enabled coaches and more accessibility for the disabled (another much required change) and so on.

Stations too, will be auctioned for redevelopment.

Nearly 100,000 cr. will be spent on decongesting the network. 77 new projects will add more lines to existing connections. Train speeds will go up to 200 kmph from the existing 130 kmph.

There’s This Awesome Investment Plan

Oh, this is beautiful:


That’s crores. This is between now and 2019, so four years to spread this in. That’s 200,000 crores per year.

To give you perspective, that is a number that’s 60% greater than the fiscal deficit of the country, in total. The Rs. 200,000 cr. per year is massive – it comes close to the amount we spend on defence. (If you were one of the people packed like sardines in a train, it might sound like a battle every day, we know.)

Who’s Going To Fund It?

Like the bankers like to say: Your pension fund. (Note: There’s more, but that is likely to be part of the funding process)

They will borrow about 34,000 cr. from the markets and from institutions. They’ll get another 40,000 cr. from the government. (about 50% higher than last year).

This only helps with the current spend of Rs. 100,000 cr. this year. The rest of the funds have to be discovered next year, but they don’t want to burden the government. This sounds like a tough ask.

The problem really is that as a government entity, there is no layer of corporatization. If you buy a Railway bond, it’s as good as a government obligation. So in effect any bonds that the IRFC (the railways Finance arm) issues is the debt of the government, even though it might not show as a government bond. It may be better to work towards a solid corporate structure with government ownership, so that one can independently determine if this “bond” might actually be in trouble or if the debt burden of the Railways is too much.

It’s Good In Principle, But Sets Us Up For Disappointment

If they solved this issue of funding – and they can if the corporatize, make it transparent and do the finances well – the upgradation plan can be huge and beneficial. We do need some of these things anyhow. Elevators and Escalators, lighter and faster trains and clean toilets are basic needs of a railway system, and it’s a shame we don’t already have them.

We don’t even know why our cities (like Bangalore) don’t attempt to use the current rail network for intra-city travel, given that the railway lines are empty most of the time. There’s no real plan to do so even now, but such a plan can help, and automatically investment will flow into railway station upgrades, advertising and such.

The plan is ambitious, but we think the funding of these plans aren’t well thought through. As more clarity emerges, it might be that there is no way to secure this layer of funding, and that we might have to force the money out of banks or institutions or your pension funds. This would again be a disaster, because it doesn’t really mean “less government”, it’s a truckload of government shoved down our throats.


Subscribe to Capital Mind:

To subscribe to new posts by email, once a day, delivered to your Inbox:

[wysija_form id=”1″]


Also, do check out Capital Mind Premium, where we provide high
quality analysis on macro, fixed income and stocks. Also see our
portfolio which has given stellar returns in our year, trade by trade
as we progress. Take a 30-day trial:

[wysija_form id=”2″]

  • DJ says:

    Railway budget should start with a disclaimer:
    This budget will be injurious to your health. Watching the session or reading the budget might destroy your brain cells and require you to undertake mental therapy. It might make you loathe yourself as an Indian and commit self-racism/suicide.

  • Prakash G.R. says:

    The Ola/Uber kind of tracking is not there, but still this one is good enough:

  • foo says:

    200,000 Crores per year in investment. Hmmm.
    On an unrelated note,
    AAP is spending 2,000 Crores per year for water/power subsidies to the 1 Crore population of Delhi.
    If the whole country takes up this great idea, we need only 100x the amount for 100x the population i.e., 200,000 Crores!
    So what do you want? Subsidies or investment?

  • Ramesh says:

    “We don’t even know why our cities (like Bangalore) don’t attempt to use the current rail network for intra-city travel” .. I have always wondered why they can’t run trains to the Devanhalli airport .. you don’t even need to lay much extra lines ..

  • Billu says:

    There is (supposed to be) live view of running trains in these website (Searching Rail Radar) (redirected from
    There were better (read: more open) system earlier, but they thought to reduce to information given outside.
    As for corporatisation, there is talk of dividing up the zones, but Modi has to deal with unions on that one and he probably is scheduling the fight for later.

  • vinayaka says:

    you mean to suggest adding GPS in the train and let anyone(including the terrorists) track it in real time?

  • Sameer says:

    Their is already an App from IRCTC which let your track trains on live status basis. Try that.
    On the Rail budget front, I am quite impressed with the vision to take railways into next level.

  • Deep says:

    Railways will find it difficult to raise volume and value growth in the face of stiff competition from other transportation modes.

  • Kumar says:

    Is it not an expressed intent of the government to increase retail participation in the stock market? Perhaps this will be done in another way without diluting the stake : get big buyers like LIC etc, fund SPVs that are set up for the express purpose of funding such programs.
    i, for one, would be happy, if the trains can run without rats in them. Indian railways is sometimes known for its shit-redistribution program that they run india wide [bio-toilets might put an end to that].

  • Krish says:

    The toilet smell at each and every R’way stations all over India is unbearable. I don’t need anything except this basic cleanliness. I want the minister to introduce budget to remove this stench from every station rather than focusing on wifi, cameras, new tracks, new booking and so on.
    I don’t want any foreign tourist to visit our stations. For NRIs, the comments after the visit would be terrible to hear.